...In the case of the grains the darn things are mean-reverting.
If wheat doubles in price, the acreage devoted to wheat goes up and prices come down. The substitution effects at the producer level are predictable if not timable:
better net profit for soybeans than corn? Beans it is boys!...

Rising commodity prices have kicked off a cotton boom in central California. And though California's current production numbers are a pittance compared with the 1990s, when more than 1 million acres of cotton flourished, farmers are ramping up -- particularly in the San Joaquin Valley, historically the heart of the state's cotton industry.

Growers were expected to plant a total of 309,000 acres of Pima and upland cotton this year, up from 201,000 last year, according to the U.S. Department of Agriculture's Economic Research Service.
A similar movement is happening in the South, Southwest and elsewhere in rural America. Nationwide, the total acreage of cotton planted grew nearly 21% this year, to 11.04 million acres. The amount of cotton harvested? It jumped 51%.

But whether this boom will bust depends on a number of factors.
There's the question of whether investors will continue to drive up cotton prices, as part of a broader push into the commodity markets as a hedge against inflation and the risk of further devaluation of the dollar and other paper currencies. There's the question of how much support -- and how many subsidies -- cotton will have in future federal farm bills.

And, of course, there's perhaps the biggest question of all: Will the water be available to grow cotton?...MORE